PayPal Raises Future Outlook, Expands Margins Amid Competitive Pressure from Apple
PayPal Holdings Inc (NASDAQ:PYPL) reported fiscal first-quarter revenue growth of 9% year-over-year to $7.7 billion, beating the consensus estimate of $7.5 billion.
The company reported quarterly adjusted EPS of $1.08 per share, missing analyst estimates of $1.22.
Total payment volumes increased 14% year-over-year to $403.9 billion in the quarter. Payment transactions were up 11% in the quarter, and payment transactions per active account increased 13% on a trailing 12-month basis. Total active accounts decreased by 1% to 427 million.
The operating margin expanded 84 basis points to 18.2%, and the adjusted operating income increased 15% year over year to $1.4 billion.
Operating cash flow came in at $1.9 billion, and free cash flow came in at $1.8 billion. PayPal held $17.7 billion in cash and equivalents as of March 31, 2024.
“2024 remains a transition year and we are focused on execution – driving our key strategic initiatives, realizing cost savings, and reinvesting appropriately to position the company for consistent, high-quality profitable growth in the future.” Alex Chriss, President and CEO, said.
Outlook: PayPal expects second-quarter revenues to increase by 6.5%—7% foreign exchange neutral or revenue of $7.761 billion—$7.797 billion versus the consensus of $7.797 billion. It expects adjusted EPS to grow in the low double-digit percentage compared to EPS of $0.87 in the prior year’s period and consensus of $1.21.
PayPal expects full-year 2024 adjusted EPS to increase by a mid to high single-digit percentage compared to $3.83 Y/Y (prior expectations of in line with FY23 adjusted EPS of $5.10. Current analyst estimates are calling for an EPS of $5.08 per share.
Consumer spending remains robust despite ongoing economic concerns impacting the payments sector. While lower-income groups have reduced discretionary spending, most Americans continue to engage in online shopping, dining out, and traveling, CNBC reports.
PayPal’s low-margin business offerings have seen significant growth, whereas its branded products have experienced slower growth due to heightened competition from rivals like Apple Inc (NASDAQ:AAPL).
Earlier this year, PayPal announced it would eliminate approximately 2,500 jobs, representing 9% of its global workforce.
PayPal Holdings stock lost 11% in the last 12 months. Investors can gain exposure to the stock via Amplify ETF Trust Amplify Mobile Payments ETF (NYSE:IPAY) and Global X FinTech ETF (NASDAQ:FINX).
Price Action: PYPL shares traded higher by 5.81% at $70.90 at the last check Tuesday.
Photo courtesy of PayPal.